AHDB has forecast a slowdown in GB milk production as lower milk prices and expensive input costs could cause a 'winter crisis' in cash flow.
This will be further exacerbated by rising interest rates, the levy board says, meaning the cost of borrowing and overdrafts are much higher.
According to its milk forecast update, GB production for the 2023-2024 season is forecast to reach 12.32 bn litres, 0.5% less than the previous milk year.
The milk year so far has run ahead of last year’s production being driven by the higher prices seen at the end of 2022 and beginning of 2023.
This led to higher yields and a slowdown in the rate of cows leaving the herd, AHDB explains.
In addition, favourably wet weather through the majority of the summer led to high levels of forage availability keeping production ahead of last year.
However, AHDB says that with a much lower milk price and 'eye-wateringly' expensive input costs, many farmers could be facing a 'winter crisis' in cash flow.
In addition to that, many producers will be hit with a bumper tax bill following the last year of high milk cheques.
Susie Stannard, AHDB's lead analyst, explained more: "There will be little incentive for farmers to push cows and herd reductions could be made to boost cash flows later in the autumn/winter.
"Therefore, we expect that milk flows will begin to dwindle, steadily in the short term, with potential for some bigger reductions in the early part of 2024.
"There is a risk that some farmers may elect to keep their foot on the production pedal to keep their overall milk cheques at a reasonable level.
"However, bearing in mind current costs of production, chasing marginal litres for a headline milk cheque could be damaging for on-farm profit margins but also contribute further towards the current over-supply issues."